DMG tunes in to Melbourne

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Getting the show on the road ... DMG has spent truckloads setting up an Australian radio network. Photo: Brendan Esposito

UK-backed DMG Radio has emerged as the front-runner for Melbourne's next FM radio licence, after any doubts about its financial backing were eliminated yesterday.

DMG's parent, Daily Mail and General Trust, announced yesterday it had withdrawn from discussions with Hollinger International about the purchase of Hollinger's newspaper assets, including the Daily Telegraph.

There had been speculation a successful bid by DMGT and its consortium partner, private equity company CVC, for the Telegraph Group would put a squeeze on DMGT's Australian radio operations.

DMG chief executive Paul Thompson, who runs Australia's Nova FM network, said that, contrary to speculation, the parent company's interest in the Telegraph had no influence on his decision to bid for a second FM licence in Melbourne.

"It does not change any part of our Australian operations," said Mr Thompson, who plans to register his interest in the new Melbourne licence.

The Australian Broadcasting Authority yesterday invited applications for a new commercial radio broadcasting licence to serve Melbourne. Applications will close on July 15 and the auction is expected mid-August.

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DMG has already won three of the four licences sold by the ABA in its last round of auctions before digital licences are introduced to the sector.

Four years ago DMG shocked the industry with a $155 million winning bid for a Sydney licence that became the cornerstone of its Australian FM network. Last October it paid $24 million for an Adelaide licence; in April the company won a second Sydney licence for $106 million and a month later paid a knockout $80 million for a Brisbane licence - taking its regional and metropolitan licences to 67.

Industry pundits expect the Melbourne licence to go for anywhere between $60 million and $100 million, in a market with advertising revenue of about $140 million a year.

Broadcasting regulations restrict ownership to two licences per city, blocking DMG's metropolitan competitors Austereo, Australian Radio Network and Southern Cross Broadcasting from bidding for the Melbourne licence.

DMG's success in the Brisbane and Sydney auctions is thought to have derailed plans by Sir Richard Branson and John Singleton to launch a rival FM network by buying new licences - but they may still bid for Melbourne.

Regional publisher Rural Press bid aggressively for Brisbane in the hope it could team the station with its nearby Ipswich radio operation. It has no radio presence in Melbourne.

A wild card bid could come from Macquarie Bank. Earlier this month it unveiled plans for a media investment fund to be seeded with a $173 million takeover of regional radio operator RG Capital.

Macquarie is also believed to have approached DMG to buy its 60 regional licences. Mr Thompson declined to comment on that speculation.